Marriage: The ultimate financial contract

Bride-to-be Shannon Fostka’s wedding plans don’t include a fairy tale dress or lavish reception — she’s done it before and this time around she’s pledged to start married life on sound financial footing.

While it’s easy to get swept up in the romance of a wedding, marriage is also a contract that comes with weighty financial decisions: will you take on each other’s debts and assets? Are you going to merge all your money or keep some separate? And how are you going to divvy up bill payments and other responsibilities?

These are the type of questions you need to ask one another before walking down the aisle. Canada’s divorce rate is 41 per cent and money is one of the big things couples fight about.

“Not to sound unromantic, but this is kind of like a business contract because when you come into it you want to discuss all your goals and intentions,” says Alim Dhanji, a certified financial planner at Assante Financial Management.

After reuniting with fiance Jeff Stritzel — an old high school friend who has also been married before — through Facebook and dating for about a year, Fostka, a 36-year-old marketing specialist, wants to make sure they’re on the same page of the balance book.

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“We’re very open and communicative about our finances, there are absolutely no secrets … just because we’ve both been through it before and everyone gets a little wiser about these things,” she says.

Fostka and Stritzel plan to share a joint bank account and this time Fostka is focused on being an equal partner in managing the money.

While the couple began talking finances about four months into their relationship, there are still some lingering questions.

“The day-to-day money for food and transportation and that kind of stuff, I don’t think that’s when you get into the problem, it’s when one partner wants to buy something extravagant,” she says.

For instance, Stitzel wants to throw a 40th birthday bash in Las Vegas and wants to travel. But Fostka thinks that any savings should go toward the house they plan to buy together.

“He really thinks it’s important to break away from the day-to-day grind a couple times a year and take a great trip. I’ve travelled extensively, I’m kind of over it,” she says.

“He’s trying to find more of a balance there. I love travelling but if the goal is going to be the house I feel that’s where we should dedicate the money.”

This may be a couple that benefits from having a joint account, but allocating an “allowance” for personal spending to ensure both people feel they’re getting what they want, says Sun Life financial adviser Melanie Adams.

“If you’re going into that union and you want it to be successful, then come to some sort of compromise about things that are really important.”

Most importantly, couples should be up front about their situations and have a plan before going in — written if possible, experts say.

Dhanji suggests writing up a budget before getting married can help open a dialogue and bring a person’s financial past to light.

Sometimes people are embarrassed to talk about their situation if they feel their partner is better off than they are. So keep the lines of communication open, don’t be judgmental and seek advice from a neutral third party.

If one person is bringing in debt, talk about whether you’re willing to take that on, or whether it’s better to wait to get married until after that debt is paid.

Another important decision is the degree to which your incomes will be combined — most couples still opt for completely joined accounts, but there’s no method that necessarily leads to a more successful marriage, as long as you keep talking.

“Joint accounts are the most common, but I can tell you even though it’s the most common, it doesn’t mean that those people using joint accounts are doing it effectively,” Adams says.

“So communicate, have those meetings about money on a regular basis to make sure what you’re doing is working, and if not, maybe you need to try a different route.”

There are flexible ways of approaching finances that provide individuals with more freedom.

“I’ve seen single accounts work. Another scenario that’s really common is there’s a joint household account and then each will maintain their own mad money accounts,” Adams says.

That way you can still surprise your spouse with a present or make impulse buys the other person may not approve of, she adds.

Joint works best when one person takes on the money manager role and both are good communicators and have the same views about priorities.

The next most popular option is having a household account to which each contributes a certain portion of their paycheques. Then decide which type of expenses — mortgage, grocery, bills and car payments — to cover in that account. Some couples combine investments and some keep them separate, she says.

Separate accounts are less common, but that may be because it’s traditional to combine money and people assume merging money is tantamount to being married. This situation works if both want to maintain control of their money, or if one person is a saver and the other a spender and compromises can’t be reached.

Dhanji says that having some personal money aside is a good idea.

“What my wife and I do is we take one of our paycheques and we combine it and we put it into a joint account for our joint expenses and our other paycheque, we keep that in our own personal accounts for our personal spending.”

Separate accounts work as long as couples do budgeting together so they are aware of their situation as a whole, he adds.

Dhanji also recommends that couples split the money manager role — with one person paying the gas bill and the other the cable — so that neither person feels left out or overburdened with the responsibility.

It’s also a good idea to divvy up whose name is on those bills because if one person is in charge the other spouse isn’t building new credit, which could reflect poorly if there is a split down the road.

Budgeting for a wedding is good jumping off point to see how your partner deals with money, whether they splurge and save.

“The wedding can mirror life later on,” Adams says.

“You can learn a lot about your partner and how their going to compromise through that exercise.”